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City Loses Court Battle Over Apartment Rents

EAST PALO ALTO, CA-A San Mateo County Superior Court judge overturns an "urgency ordinance" that limited rent hikes beyond the city's voter-approved rent control program.

By Brian K. Miller | Updated on February 26, 2008

EAST PALO ALTO, CA-After buying up more than 1,600 apartment units in this working-class Bay Area city over the past 15 months, Page Mill Properties of Palo Alto has won a court battle over apartment rental rates. A San Mateo Superior Court judge this week overturned a temporary ordinance passed by the East Palo Alto City Council that restricted rent increases beyond that laid out by its long-standing voter-approved rent control program.

The City’s rent control program, initiated in 1988, issues to apartment owners annually a certificate that states what the maximum rent owners can charge for each of their units based on a set formula that applies a CPI increase to the previous year’s rent ceiling. Beyond the year it was implemented, however, the program does not take into consideration the actual market rent being charged at the property, and because the owners who sold their properties to Page Mill hadn’t maxed out the rents – either because the properties’ condition didn’t warrant it or prospective tenants could not afford it – the difference between the rent ceiling and market rents had grown to about 37%.

The City Council, apparently concerned that Page Mill might try to max-out rents, passed an “urgency ordinance” that restricted rent increased to 3.2% above the actual rent being charged at the properties. This week, Judge Beth Larson Freeman ruled the temporary ordinance unenforceable for several reasons, not the least of which is that the voter-approved rent control program, known as the Rent Stabilization Ordinance, cannot be modified but by the voters.

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